Towards the Integration of Risk and Value Management

Abstract

Governments are increasingly faced with the challenge of delivering infrastructure developments under difficult budget constraints. Public Private Partnerships (PPPs) are being used widely as a means of meeting public infrastructure demands through private finance. The aim is to achieve value for money (VfM) through the allocation of risks to the party who can manage them more effectively. If project risks are not well managed, the project will face cost, quality and time overruns thereby affecting the viability of the project. Both Risk Management (RM) and Value Management (VM) are considered to be best practice in project management and enable organisations to define objectives when delivering complex projects whilst reducing risk and maximising value. Over the years researchers and practitioners have argued that the integration of RM and VM in a single study would avoid duplication of work and deliver better value for money thereby leading to better project outcomes. As part of an on-going doctoral study into the integration of risk management and value management in PPP projects, this paper attempts to examine the application of risk and value management practice in infrastructure development projects, predominantly in PPP projects, through semi-structured interviews conducted as a qualitative research methodology with ten industry practitioners. To achieve this aim, this paper attempts to identify the similarities between the two processes along with the benefits and critical success factors for the integration of RM and VM in PPP projects. The results suggest that, although risk and value management activities are said to be used in projects; “formal” RM and VM studies are rarely undertaken. The observations to date suggest that, although there are barriers against the integration of VM and RM, there is a need for the development of a systematic process to enable the integration of risk and value management to occur.